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Tuesday, March 23, 2010

Don't Break the Bank - Cheap Ways to Finance Home Solar Energy

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Most people would love to install solar panels on their home and truly "go green", but they stop short because of money. Many people think the only option to pay for solar power is to put cold-hard cash on the table at the time of installation.

While this may be the "best" option in terms of overall cost (by the way... so is paying cash for a home, but most people didn't do this!), most of us don't have the extra $20k to $60k sitting around burning a hole in our pocket.

For the lucky few who can afford this, great! However, for the rest of us normal folks, we would still like to go green and have some other options. Well, there is good news. There are some creative ways of financing your desire to go green.

Let's first talk about the traditional ways of financing solar and then we can get to the new and upcoming ways that are starting to come about with the recent increase in interest in alternative energies. Let's make this quick and simple.

1) Pay cash - This is great for saving money in the long run but is limited to the more affluent.

2) Home Equity Loan - Also a good option, but limited to those that have a good amount of equity in their home. Be careful because if the loan kicks you over 80 or 90% Loan-To-Value, you may be paying a more interest than necessary.

3) Refinancing - There are several options as far as wrapping the cost of your solar installation into the mortgage of the home. This is perhaps the cheapest on a monthly basis because you can amortize the loan over 15 or 30 years and thereby drop the monthly payments.

In doing it this way, you should have a net savings over your old mortgage plus your old utility bill. Freddie Mac has programs that will finance up to 10% above your base loan as long as the total loan is below $240k (for a free guide to financing solar energy systems see below).

4) Build your own solar panels - Okay, perhaps this isn't a method of financing, but ultimately it could enable the more tech savvy to be able to afford solar energy for their home. Heck, you can save 50 to 75% off the cost of going solar by doing it yourself.

Besides, there are many great Ebooks out there that make building homemade solar panels easy even for a novice with video tutorials in addition to detailed plans and equipment/supplier lists. If you have every thought about what it would take to make your own solar panels and save a lot of money, I invite you to read my review article "Save Thousands by Building Your Own Solar Panels - A Review".

5) Power Purchase Agreement (PPA) - If you can give up the attachment to owning your own solar panels there is a way to help the financial burden of installing solar power in your home. PPA's are a hot topic right now so keep an eye on this.

A PPA is a financing tool that allows a independent company to install solar panels on your house and then sell you back the electricity it generates. They own the panels and the electricity they generate, but you get the benefit of going green and most likely a little drop in utility costs since they amortize this long term.

They typically request that you kick in about 33% (on average) of the cost of installation, but they take this into account when setting the fixed rate they charge you for electricity. The more money you kick in, the cheaper the fixed rate.

The great thing is that your rate for your solar generated electricity is fixed over the agreement period, so as public utility costs go up you can sit back with a big grin on your face. For a listing of companies that are active in the PPA market, visit PPA Companies

6) Lease - Another great candidate for creative financing is leasing your panels from an outside company. There are companies that will take care of everything as far as costs and installation and you simply lease the panels from them by paying a monthly lease payment that is equivalent to paying your utility bill, but cheaper.

There are a couple of really nice features with this option: there is less money required down than the PPA option (typically 0 to 2% of installed cost), system maintenance is handled by the leasing company, and the homeowner gets 100% of excess production.

To summarize, the financial market is starting to view solar energy as a good investment and therefore many new programs are being developed to help the homeowner convert to green energy.

Solar companies are also figuring out ways to alleviate the costs to the homeowner by PPA's and lease agreements. In addition, more traditional sources of financing like banks are starting to figure out that financing solar can be a lucrative endeavor.

Couple all of this with government incentives and the push towards a "green energy economy" and you have yourself a great opportunity to finally fulfill on your dream of going solar.

Visit Solar Energy Systems for more information. You'll also find the following helpful references on our website:

- Database of State Incentives for Renewable Energy (DSIRE)

- Free Borrower's Guide to Financing Solar Energy Systems

- Power Purchase Agreement (PPA) Companies

Ken has his PhD in Electrical Engineering and specializes in solar technologies, green energy, and the economic tradeoffs associated with alternative energies.

Article Source: http://EzineArticles.com/?expert=Ken_E._Anderson

Labels: bank finance, home solar energy, ways to bank finance

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Bank Finance Needed to Support Your Business - 11 Points to Consider

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Most requests for bank finance are turned down not because clients are a poor credit risk but because they have approached their bank ill-prepared. Get ahead by communicating the right information the first time.

CASHFLOW Provide data that shows you understand and can manage your working capital (debtors, creditors and stock) and that the cash in your business is sufficient to cover the bank's interest (as well as other key costs such as tax, dividends and replacement capital).

"Cash is king" and even profitable businesses can fail if cash is not managed. Understand your cash movements and you may even need to borrow less.

OUTLOOK Present forecasts which communicate the amount required, payback period, risk and return to the bank. Figures should be more sophisticated than forecast sales and profit and should ideally show the relationship between profits, your balance sheet and cash flows.

Sensitivity analysis is important to help the bank understand when they risk non-repayment. Forecasts should always be based upon the most up to date actual data.

MARKETS Explain your market. Focus 20% of your efforts explaining what has happened and 80% on what you expect to happen and why. Do not worry, top economists sometimes get this wrong too. The point is you need to show the bank you have thought about it, considered the likely outcomes and that you have a clear action plan.

MIX AND QUALITY OF CLIENTS Detail clients by name/industry/region/contract length. The strength of your clients and their ability to pay = the strength of your business. Building your business around one client is high business risk.

UPDATE Give the bank up to date management information especially if annual accounts are dated. Information should be produced at least quarterly, split into division/region and include profit, balance sheet and cash flow breakdowns.

Management information should be used to update forecast/budget data and any differences should be explained.

NEED FOR LIQUIDITY Show the bank that your business is liquid and can survive. Tell them how quickly you get your hands on the cash and know your debt maturities, credit terms and what cash is tied up in assets.

Think beyond a simple current assets/current liabilities ratio and consider your ideal liquidity position. Remember too much liquidity means assets could be generating a higher return elsewhere.

INCOME Know your financial definitions. Are you talking about gross profit, operating profit, net profit or EBITDA (earnings before interest tax, depreciation and amortisation)? All are common in the financial analysis of businesses. Also ensure you can discuss the seasonality and cyclicality of your industry.

COMPETITION Tell the bank how you have you performed in comparison to your competitors? Be prepared to discuss your competitors' strengths and weaknesses. This provides confidence that you are a proactive management team that really understand the business.

ACTIVITIES Break your business down by activity/division and tell the bank which activities are performing well and which are a cash drain and why. Explain how divisions complement or overlap each other and the strategy for each. Be ready with forecasts if necessary.

TRACK RECORD Unless starting up, provide at least 3 years accounts to a bank (5 years ideally if approaching a new bank) and up to date management accounts.

A bank will need this data for the financial analysis of the trends in ratios and margins. It will also give them confidence in your management track record.

EQUITY, DEBT AND THE BALANCE SHEET Communicate your risk (equity/directors' loans) versus the risk to the bank.

Know the real strength of your balance sheet by having current market values of assets to hand and full details of debt (including off-balance sheet exposure such as leases and guarantees). Be clear at the outset what security is and is not on offer.

Forward Financials are experts in the financial analysis industry and as Qualified Accountants, Qualified Bankers and City Analysts combined we speak the language.

With our comprehensive financial pack you can make a professional approach to lenders, shop around for the best deal and negotiate fees from a stronger position. We do not believe in a template approach as every business has different drivers and needs.

We therefore build bespoke financial models to forecast sales, profits and cash flow. We also provide historic, competitor and market analysis.

If you need any further advice on the above please contact Forward Financials at http://www.forwardfinancials.co.uk

Article Source: http://EzineArticles.com/?expert=Delphine_Paterson

Labels: bank finance business, bank finance needed, support bank finance